First Chapter: National Urban Policy in the Age of Obama by Hilary Silver

urban policyBelow is an excerpt from a new edited volume Urban Policy in the Time of Obama. With President Obama’s term coming to an end Friday, we take a look back at the legacy he will leave behind. Hilary Silver, Senior Visiting Fellow at the Ash Center and Professor Emerita of Sociology and Urban Studies at Brown University, shares her chapter “National Urban Policy in the Age of Obama.”

Many supporters expressed disappointment that the first African-American community organizer to be elected US President did not do more to help cities. Although Barack Obama began to embrace the subject of race relations late in his second term, his urban policy seemed to disappear as his Administration endured. Signature initiatives like Choice Neighborhoods and Promise Zones were anemic in comparison to his predecessors’ programs, adding to the impression that the days of national urban policy were over. Yet, this chapter argues, President Obama did have an effective urban policy that worked by stealth, one embedded in the Recovery Act, foreclosure policies, and other stimulus programs. He also made headway against homelessness. Obama’s urban policy was pursued through new forms of governance as well, promoting interagency cooperation and leveraging resources. Thus, his legacy is not as modest as some have suggested.

This post is part of an occasional series highlighting chapters of recent books by those affiliated with the Ash Center. “National Urban Policy in the Age of Obama” by Hilary Silver appears here by permission of the University of Minnesota Press from Urban Policy in the Time of Obama edited by James DeFilippis, copyright 2016 by the Regents of the University of Minnesota. All rights reserved. Readers can purchase the book here.

 

By Hilary Silver

Barack Obama should have been America’s first urban president. As a candidate and then president-elect, he gave every indication that he would be. But he entered office during the worst downturn since the Great Depression and soon confronted a hostile Republican congressional opposition prepared to go to the mattresses to prevent new spending. If Obama had any big plans for new urban initiatives, they were quickly diminished. Yet he did have a beneficial impact on American cities, as I will show, primarily as a by-product of nonurban federal pro- grams, stimulus expenditures, and organizational efficiencies that required no new dedicated allocations. In his second term, after a wave of racial disturbances, he also benefited from a fortuitous Supreme Court decision on fair housing. Whether Obama’s accomplishments add up to a national urban policy, therefore, is a matter of how one conceives of such a policy.

A look back at the history of national urban policy in the United States reveals at least such two conceptions. First, one can discern a series of federal policies between 1929 and 1968 that stimulated the economy and ultimately rebuilt American cities in a modernist vein. Early in the 1930s, faced with the Great Crash in finance, presidents Hoover and Roosevelt restructured federal regulation of the banking and housing markets. These institutional innovations ushered in three decades of Keynesian intervention that increased demand, helped organize labor, and reduced unemployment through public works, infrastructure, and public housing construction. As the postwar suburban boom took off, the “federal bulldozer” cleared away “slums,” built interstate highways, and introduced master planning for downtowns. The process was racially biased, of course. In response to civil rights protests, large-scale demolition of minority neighborhoods ceased, and the War on Poverty infused these places with federal funds. Federal spending expanded local government services, and the Community Action Program under the Office of Economic Opportunity provided African Americans with public or nonprofit sector jobs, and cemented this “urban” constituency in the Democratic Party. The expansionary, interventionist period of national urban policy culminated in 1965 with the establishment of the Department of Housing and Urban Development.

The ensuing urban disorders, however, marked a watershed in the activist type of national urban policy. Just as African Americans were turning votes into mayoralties, President Richard M. Nixon initiated a decade-long period of national urban policy sensu stricto. What passed for “national urban policy” in this second sense was the consolidation of many discrete programs and interagency cooperation in governing them. Nixon initiated what would become a long-term shift from Keynesian to neoliberal macroeconomics, from public works to private partner- ships, and from federal to state and local-level program priorities. Although Democratic president Jimmy Carter took up the theme of national urban policy once again, his successor, Ronald Reagan, largely gutted federal aid to the cities, recruiting the private sector and lower-level governments to the role. Federal urban pol- icy shrunk to subsidizing neighborhoods with tax reductions in a limited number of cities: enterprise, empowerment, and under Obama, promise zones. Budgetary starvation eroded the few public programs that remained, with little change during the Bush I, Clinton, and Bush II administrations.

homelessnessThe Obama administration pursued a national urban policy in both senses. First, the Great Recession afforded an opportunity to conduct a neo-Keynesian urban policy by stealth. Stimulus funds went directly to “shovel ready” infra- structure projects and to keeping government employees on the job, with disproportionate urban impact. However, the scale of federal intervention in distressed neighborhoods—Choice Neighborhoods—was anemic compared to the postwar effort. In addition, the president and Congress reformed the financial system, especially for housing, through new institutions and regulations. The American Recovery and Reinvestment Act (ARRA) included a foreclosure-prevention program, Making Home Affordable (MHA), which had two components, the Home Affordable Modification Program (HAMP) and the Home Affordable Refinancing Program (HARP). Obama also capitalized the National Housing Trust Fund for the first time, and signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, establishing the Consumer Financial Protection Bureau (CFPB) and creating a mechanism to close failing banks without future taxpayer-funded bailouts and to break up banks that are “too big to fail.” Second, like the Nixon and Carter administrations and unlike his immediate predecessors, Obama adopted a national urban policy in the formal sense, innovating in governance. Early in his first term, he created a White House Office of Urban Affairs to reassess existing, explicitly urban programs with evidence on their performance, to coordinate them across agencies, or to consolidate them to realize efficiencies. Some programs were repack- aged to receive additional funding or to attract private resources, but few new signature urban programs emerged. President Obama was more successful at shaping the governance aspects of national urban policy than at producing results on the ground. The scale of and resources for Obama’s urban, housing, and other place-based pro- grams were modest, and the results disappointing. The minor impact is a result not only of the recession, but also of the sequester and other Republican budget shenanigans designed to undermine the Democrats politically.

If President Obama has one potential legacy in urban policy, it may be “ending” homelessness. Federal homelessness policy dates from the 1987 McKinney-Vento Act. Because it was enacted after the heyday of national urban policy, urban scholars often neglect to discuss federal homelessness policy in favor of more long- standing programs. At the turn of the twenty-first century, advocates began pressing for an end to homelessness and for a change from the linear continuum of care to a “Housing First” model. In 2003, the administration of President George W. Bush adopted a plan to end chronic homelessness, including funds for 150,000 additional permanent supportive housing units for disabled adults. Hundreds of American cities organized local service providers and advocates, both secular and church-based, for local campaigns to end chronic homelessness in ten years. But this effort gained traction, expanded to veterans, and changed course under the Obama administration. Unlike most urban line items, the federal government did increase spending for Housing First approaches to homelessness and extended the goal to end homelessness among the “deserving poor” of homeless veterans and families. As the deadlines now approach, President Obama could claim credit for this mostly urban accomplishment. It is still too early to assess his record on fair housing, which was another area in which executive powers enabled him to act without congressional approval.

 

Two Eras of National Urban Policy

Keynesian Era Urban Policy

Federal intervention in the cities began in earnest after the Great Crash of 1929. Overwhelmed by foreclosures and bank runs, unemployment and poverty, state and local governments turned to Washington. The first phase of national urban policy helped to stimulate the economy while rebuilding American cities. President Obama would adopt this approach too, but on a much more modest scale.

The first phase of federal engagement in cities entailed the regulation and restructuring of the housing finance system to encourage housing construction. Initially President Herbert Hoover did what he could to resurrect the financial system through the Federal Home Loan Bank Act of 1932, providing savings and loan associations with capital to make mortgage loans and extending the terms and maximum loan-to-value of home loans. But it took President Franklin Delano Roosevelt to address the hemorrhaging foreclosure rate, further liberalize mortgage terms, and restructure the edifice regulating and insuring banking and housing markets. With half of all home mortgages in default by 1933, he established the Home Owners’ Loan Corporation (HOLC), which bought and refinanced over a million mortgages with long-term federal bonds (Jackson 1985, 193–96). HOLC institutionalized long-term, fixed-rate, low down-payment, self-amortizing home loans, bringing homeownership within reach of middle-class Americans. This was followed by the National Housing Act of 1934, which established the Federal Housing Administration (FHA). The FHA offered federal mortgage insurance, protecting lenders in case borrowers defaulted on their loans and freeing up bank funds to build homes and to reduce interest rates. Although FHA underwriting conditions included the racial and ethnic composition of the house’s neighborhood, producing “redlining” that benefited the suburbs, the institution nonetheless provided a serious stimulus to demand that revived the construction industry for decades to come. Lastly, in 1938, the Federal National Mortgage Association (FNMA, later known as “Fannie Mae”) was established as a private subsidiary of the Reconstruction Finance Corporation to issue bonds paid off with borrowers’ mortgage payments. With these funds, FNMA purchased FHA-insured mortgages to encourage more such loans. This Depression-era history is worth recalling in light of Obama’s housing finance reforms during the Great Recession.

The FHA tied housing construction to job creation, a Keynesian principle that would continue in the U.S. Housing Act of 1937, establishing the federal public housing program for low-income households. Reflecting political compromises at the time, the 1937 Housing Act had multiple goals. It aimed to not only house the poor but also employ the submerged middle class. Indeed, if there is a single statement of national urban policy in the Keynesian era, it is found in the “Declaration of Policy” in Section 1 of the U.S. Housing Act of 1937:

“It is hereby declared to be the policy of the United States to promote the general welfare of the Nation by employing its funds and credit, as provided in this Act, to assist the several States and their political subdivisions to alleviate present and recurring unemployment and to remedy the unsafe and insanitary housing conditions and the acute shortage of decent, safe, and sanitary dwelling for families of low income, in rural or urban communities, that are injurious to the health, safety, and morals of the citizens of the Nation. (United States Housing Act of 1937, Pub. L. No. 75–412, 50 Stat. 888, 891)”

Should there be any doubt that urban policy had a Keynesian dimension, it is worth noting that in 1950, President Harry Truman reduced the numbers of new public and FHA housing units out of concern that the Korean War might compete for materials and together would increase inflation (Davies 1966). Unfortunately, this cutback created a precedent for subsequently funding a low number of units in the Eisenhower years. It took a decade to produce the authorized number of public housing units. But bricks and mortar meant jobs. After the war, the thrust of FHA- and VA-insured homeownership pushed the domestic economy full steam ahead. Suburbanization, fueled by cheap mortgages and new highways, set off a virtuous circle of mass production and mass consumption for a glorious thirty years (Harvey 1973).

The Keynesian interventionist period of national urban policy culminated in 1965 with President Lyndon B. Johnson’s establishment of a full-fledged Department of Housing and Urban Development. In elevating the House and Home Financing Agency (HHFA) to the cabinet level under an African American secretary, Robert Weaver, who had previously served as President John F. Kennedy’s director of HHFA, Johnson reiterated the same policy found in the preamble to the 1949 Housing Act. The Housing Act of 1965 authorized 600,000 units of new, leased, rehabilitated, or purchased public housing. The scale of construction was unprecedented.

In response to the backlash against urban renewal of the cities and the urban disorders of the 1960s, President Johnson passed the “Model Cities” program (Demonstration Cities and Metropolitan Development Act of 1966). To accomplish the comprehensive, coordinated revitalization of the economies of distressed neighborhoods, the program introduced master planning. Like the inner-cities Community Action Program under President Kennedy, it called for “maximum feasible participation” of citizens, especially African Americans newly empowered under the 1965 Voting Rights Act. The program quickly fell victim to politics. The number of sites rapidly proliferated to win votes in Congress. The original legislation had dedicated $2.3 billion for just six “Demonstration Cities” in each region, but every legislator wanted one in his or her district. Soon the number burgeoned to seventy-five planning grants, with implementation grants to follow. Then, a total of 225 Model Cities were designated, spreading funds too thinly to make a real dent in urban problems (Hetzel 1994). HUD also found it difficult to win “buy-in” from other federal agencies or lower levels of government, even as the urban riots increased the urgency for results.

The year 1968 marked a watershed in interventionist national urban policy. That year, the report of President Johnson’s National Advisory Commission on Civil Dis- orders, also known as the Kerner Commission, argued the country was “moving toward two societies, one black, one white—separate and unequal.” It linked the devastating riots that consumed Detroit and Newark in 1967 to residential segregation sustained and aggravated by federal policies that concentrated poor black citizens in ghettos. As part of the remedy, the commission called on the government to outlaw housing discrimination in both the sale and rental markets and to “reorient” federal policy so that housing for low- and moderate-income families would be built in integrated, mixed-income neighborhoods, where residents would have better access to jobs and decent schools. Soon after the King assassination, Congress passed the Fair Housing Act, which banned housing discrimination and required states and local governments that receive federal housing money to try to overcome historic patterns of segregation and to “affirmatively further” federal fair housing goals. Yet the act proved hard to enforce.

All told, ample funding for urban renewal during the 1960s injected a sizable stimulus into the economy. Kennedy’s 1961 housing bill authorized another $2 billion in federal capital grants, and Johnson dedicated over $5 billion to the cities, including $600 million for the Model Cities program. Thus, total federal urban renewal funding from 1949 to 1968 exceeded $10 billion for 1,946 urban renewal projects in 912 communities (National Commission on Urban Problems 1968; von Hoffman 2000). Domestic expenditures of this magnitude coupled with defense spending on the Vietnam War together contributed to inflation in the 1970s.

Yet, a backlash against urban interventionism was already apparent. Minority leaders castigated urban renewal as “Negro removal,” while conservatives called for “law and order” after the riots. Critics on the left and right pointed to the deficiencies of high-rise public housing, culminating in the mid-1970s demolition of the recently built Pruitt-Igoe project in Saint Louis. Private alternatives, like Sections 235 and 236 of the 1968 Housing Act subsidizing homeownership and private rental housing would both fall to scandals in the 1970s. The defeat of LBJ and the election of Richard M. Nixon brought the Great Society and urban Keynesianism to a screeching halt.

 

Consolidation-Era National Urban Policies

When policy experts refer to “national urban policy,” they usually mean not the New Deal or urban renewal, but the comprehensive federal intervention in cities of the 1970s. Both Nixon and Carter explicitly proposed holistic “national urban policies,” which were not fully implemented. The hallmarks of these policies were less the actual programs and their quantitative costs or outputs, but rather their governance arrangements and institutional reforms. These included four principles: interagency collaboration, program consolidation, federalism, and public–private partnership. The Obama White House Office of Urban Affairs would similarly adopt such principles.

Soon after his election, President Nixon courted Professor Daniel Patrick Moynihan to join the “liberal bloc” of his domestic policy team and largely gave him carte blanche to choose his cabinet post. Upon learning that Transportation was already taken, Moynihan said, “I’d like to have the urban equivalent of Henry Kissinger’s job on the National Security Council. A National Urban Council or whatever the name will be” (Hess 2015, 11). He got his wish. Three days after his inauguration in January of 1969, Nixon issued Executive Order no. 11452, creating the Council for Urban Affairs, which was charged with “the formulation and implementation of a national urban policy” (49). Moynihan pointed out, “the United States does not now have an urban policy. The idea that there might be such a policy is new” (49).

After the riots, Moynihan felt there was an “emerging sense that some coherent national approach needs to be made to the problems to be encountered in cities.” Unfortunately, Moynihan reflected, “too many programs have produced too few results.”

“The federal establishment must develop a much heightened sensitivity to its ‘hidden’ urban policies. There is hardly a department or agency of the national government whose programs do not in some way have important consequences for the life of cities, and those who live in them.” (Moynihan 1970, 6–8)

Reflecting the interdepartmental nature of urban problems, the National Urban Council would coordinate eight cabinet departments and agencies working on committees of cabinet officers. The National Urban Council also served to consolidate the myriad urban programs that had proliferated by the 1960s. In fact, Nixon wanted to combine or eliminate five years of “government programs for the unemployed, programs for the cities, programs for the poor” that he considered failures. But for “prudential” reasons at a time of racial instability, he decided to do this gradually. For example, he reorganized the components of OEO and Johnson’s Great Society—the Community Action Program, Head Start, VISTA, Job Corps, Legal Services.

silver 1Model Cities too was slowly squeezed budgetarily out of existence so as not to provoke its many constituencies. Edward Banfield chaired a 1969 taskforce recommending the combination of Model Cities and other federal programs into general-purpose revenue sharing (Hess 2015, 145). In 1973, President Nixon imposed a moratorium on all federal housing programs and the next year enacted his own bill (signed into law by Gerald Ford after Nixon resigned due to the Watergate scandal). Reiterating the same goals as the Housing Act of 1949—the elimination of slums and blight and conditions that threatened the public health, safety, and welfare—the Housing and Community Development Act of 1974 would consolidate Model Cities, urban renewal, open space, water and sewer grants, public facility loans, and historic preservation into the more flexible Community Development Block Grant program. CDBG shifted policy emphasis from new construction toward rehabilitation of housing. The program did not have to be focused on one neighborhood and had a broader constituency, providing support for newer, smaller cities in the South and West.

Model Cities nonetheless bequeathed a number of lessons to future programs aimed at comprehensive neighborhood revitalization. For example, to broaden political support (or spread “pork” in return for votes), President Bill Clinton would amply fund six Empowerment Zones as well as ninety-five small “Enterprise Com- munities.” Later, we will see, Obama’s Choice Neighborhoods program offered many planning grants and fewer implementation grants.

Johnson’s Housing and Urban Development Act of 1968 had set the ambitious goal of building 26 million new dwelling units, including 6 million for low- and moderate-income households, over the next ten years. Construction on this scale offered the Nixon administration the opportunity to desegregate American housing. Former Michigan governor George Romney, Nixon’s HUD secretary, intended to use the 1968 act to eliminate the “high income white noose” of the suburbs around heavily African American inner cities, an act “essential if we are going to keep our nation from being torn apart” (Hannah-Jones 2012). In 1969, there were discussions within HUD about how to use the threat of withdrawing federal housing subsidies to integrate any suburbs trying to block the construction of afford- able housing. Romney launched an “Open Communities” program that would reject applications for sewer and highway projects from segregating cities and states. HUD even terminated grants to the Boston, Baltimore, and Toledo metro areas after they rejected low-income housing slated for white neighborhoods, and thereby won con- cessions. But Nixon soon reined in Romney who had been withholding HUD funds to integrate Warren, Michigan.

To stop the Open Communities program, Nixon ostracized Romney and ordered HUD to stop all efforts to pressure cities and states to foster integrated housing. The president later wrote, “I am convinced that while legal segregation is totally wrong, that forced integration of housing or education is just as wrong.” The 1974 Housing and Community Development Act would require localities accepting federal block grants to comply with the Civil Rights Act of 1964, which banned racial discrimination, but not to follow the 1968 Fair Housing Act’s mandate to “affirmatively further” inclusionary housing. Romney resigned in November 1972. Over the next four decades, Democratic and Republican presidents would not leverage HUD funding to promote integration. The Obama administration—prodded by private lawsuits—would later withhold money from Joliet, Illinois, and Westchester, New York, for not meeting civil rights obligations, but took years to issue fair housing regulations for municipal obligations.

Nixon also reoriented housing subsidies, shifting attention from aid to places and toward aiding needy people and bringing the private sector further into subsidized housing. On the one hand, recognizing the fiscal problems of public housing authorities with declining rent receipts, the 1974 law loosened income caps on tenants and required all households to pay some rent. On the other hand, Section 8 of the 1974 law created portable rent subsidies that low-income households could redeem in privately constructed, rehabilitated, or maintained buildings and take with them if they moved. Today, Section 8 and its successor, Housing Choice Vouchers, are the main source of subsidized low-income housing, slightly exceeding the dwindling number of public housing units.

Another legacy of Nixon’s urban policy was general revenue sharing and block grants. Nixon’s “New Federalism” returned non-earmarked federal dollars to states and localities, giving lower-level governments more discretion over spending. It also consolidated many programs into four categorical block grants for training, education, law enforcement, and community development (CDBGs). Politically speaking, the approach furthered the Republican “Southern strategy” by redistributing some federal resources away from older, larger cities toward Republican constituencies in the growing suburbs and the Sunbelt. Nixon’s policies of decentralization, private sector involvement, and preference for assisting needy people over aid to places presaged the neoliberal urban policies of Ronald Reagan.

After Gerald Ford’s short term in the mid-1970s, President Jimmy Carter readopted the idea of an explicit national urban policy. Shortly after taking office, Carter formed the cabinet-level Urban and Regional Policy Group headed by HUD secretary Patricia Harris, and later established the Interagency Coordinating Council with the assistant secretaries from all federal agencies to coordinate execution of urban policy. Carter issued executive orders to conduct community impact analyses of all federal programs and, in place of politically distributed pork, to target federal spending and procurement on “distressed” cities and neighborhoods. He not only expanded the Economic Development Administration’s urban grants and reauthorized CDBGs, but unlike the Model Cities program, instituted urban development action grants (UDAG). The UDAG program awarded $4.6 billion to assist about 3,000 economic development projects in more than 1,200 cities during its twelve years of operation (1978–1989). It reoriented local economic development policy from one based on grants, tax abatements, and infrastructure improvements to a more entrepreneurial approach that recaptured public funds (Rich 1992). Carter also proposed legislation for, among other things, a national development bank to guarantee investments in distressed areas, but it was not established, partly because HUD, the EPA, and the Treasury fought over which department would run it, partly because of Sunbelt/Snowbelt disputes over allocations. Carter’s proposal for a public works program, like Obama’s to come, also failed to be approved.

All told, Carter’s proposed urban policy package would have cost $8.3 billion, of which $7.2 billion was for jobs and investment in distressed inner cities (Kingsley and Fortuny 2010). It mixed assistance to distressed places with training and other assistance to people in distress. However, distracted by inflation, fiscal crises, and political woes, Carter abandoned the urban policy just as it was getting off the ground. In fact, his own President’s Commission on a National Agenda for the Eighties issued a 1980 report that called for federal aid to go to people rather than places. “The urban consequences of essentially nonurban policies will continue to outweigh those of narrow and explicitly urban policies,” said the report. “Localities have proved to be very difficult to shore up or ‘revitalize,’ despite all our place-oriented redevelopment programs” (President’s Commission 1980, 68–69). No wonder the history of national urban policy has been called “a narrative of failure” (M. Katz 2009).

 

The Neoliberal Retrenchment Era

The election of Ronald Reagan spelled the end of national urban policy ambitions. The president ushered in an era in which HUD became a backwater of the federal government, or worse, a feeding trough for Republican political cronies (Welfeld 1992). Between 1980 and 1990, federal urban expenditures fell 46 percent, or some $26 billion in constant 1990 dollars (Caraley 1992). State aid did not replace them. Reagan’s “new federalism” ended general revenue sharing. On average, federal aid covered 22 percent of large cities’ expenditures in 1980, but only 6 percent in 1989 (Caraley 1992). From a peak of 17 percent in 1978, the federal share of total municipal expenditures gradually fell to 5 percent in the twenty-first century, with state contributions through the years remaining a constant 20 percent (Barnes 2005, 582).

Both Reagan and George H. W. Bush began their first terms with recessions, but rather than stimulate the domestic economy, they cut back on federal expenditures and cut taxes in line with supply-side economics. Without countercyclical spending through grants to city and state governments, and saddled with unfunded mandates, many cities experienced their worst fiscal and service crises since the Great Depression of the 1930s (Caraley 1992). Of all the domestic pro- grams Reagan cut back, housing and community-development programs were the hardest hit. Reagan also shifted the remaining funding from aid to places toward aid to people who live in them (Reischauer 1990; Peterson and Lewis 1986).

Compassionate conservatism under Jack Kemp and George H. W. Bush did little to increase the federal role in urban policy after Reagan left office. The Republicans preferred to support nonprofit, voluntary, and charitable social efforts, as illustrated by homelessness policy and the switch to low-income housing tax credits to stimulate private and nonprofit construction. Public housing was residualized, the stock deteriorated by defunding of capital and operating budgets. Private subsidized housing saw use restrictions expire. Instead, the number of voucher subsidies for private rental housing increased.

Over time, what passed for urban policy narrowed in focus. From Model Cities, which touched a large number of distressed places, urban policy telescoped its investments, directing tax breaks and federal aid to a small number of neighborhoods of “concentrated poverty.” The Republicans’ “Enterprise Zones” targeted specific places for a reduction or elimination of taxes and regulations in the expectation that firms would open in response to such incentives. Instead, many companies simply moved from elsewhere in the city, creating no new jobs. A “third way” politician triangulating the ideological center, Clinton combined features of enterprise zones and Model Cities. Enacted in 1993, Empowerment Zones—which were expensive and few in number (six)—were accompanied by many more “Enterprise Communities” offering both new spending and tax incentives to poor neighborhoods across forty-one states and the District of Columbia. The program mandated involvement of the private sector as well as the community in strategic planning for how to use these coordinated targeted resources to transform local economies and communities.

The cumulative impact of these changes was to disempower cities politically and to starve housing and urban programs fiscally. In 2005, William Barnes of the National League of Cities concluded, “The era of federal urban policy is, like, way over. . . . Under Democratic and Republican leaders alike, urban policy has receded into a Washington backwater, and is unlikely to reemerge as a priority any time soon.”

 

Obama’s Urban Policy

The election of Barack Obama as the first president of the United States with a mixed-race background and experience in community organizing raised expectations for greater federal attention to the nation’s cities. His memoir, Dreams from My Father, recounts how, at the age of twenty-three, he worked for a coalition of churches in Roseland on Chicago’s deindustrializing far South Side (Obama 2004). From 1985 to May 1988, he was director of the Developing Communities Project, organizing black working-class residents to win improved playgrounds, afterschool programs, housing, youth mentoring, parenting, job training, and other neighbor- hood services to fight joblessness. During that time, he organized a tenants’ rights organization in the troubled Altgeld Gardens low-rise public housing project nearby. During those Chicago years, he advocated for comprehensive change in high-poverty neighborhoods. In 2007 and during his 2008 presidential campaign, then-Illinois Senator Obama called for replicating Geoffrey Canada’s Harlem Children’s Zone, a public–private partnership providing a full network of neighborhood services from “cradle to college,” reminiscent of the Developing Communities Project. Accordingly, in the 2008 presidential election, he won the votes of city residents by a twenty-eight-point margin.

Barack Obama experienced the rough-and-tumble world of Chicago politics after graduating from Harvard Law School. Barack and Michelle Obama cemented their friendship to Valerie Jarrett, who had worked for mayors Washington and Daley and had recruited Michelle to the Mayor’s Office and then to Chicago’s Department of Planning and Development. Jarrett connected the Obamas to the city’s elite, worked hard on their election campaigns, and became a loyal confidante. Similarly, Obama’s inner circle included chief campaign advisor and strategist David Axelrod, who helped reelect Harold Washington, the first black mayor of Chicago, and successfully ran mayoralty races in a half dozen other cities. Axelrod was known for his experience in shaping urban coalitions of blacks, Hispanics, and white liberals like the coalition that made Obama “the first urban president in more than a century” (Gergen 2015, BR12). After Obama’s election in 2008, Axelrod and Jarrett were appointed White House senior advisors. Axelrod left the White House and returned to Chicago in early 2011, as did former chief of staff, now Chicago mayor Rahm Emanuel in 2010. Jarrett remained as assistant to the president for Intergovernmental Affairs and Public Engagement, managing among other agencies the White House Office of Urban Affairs, created by President Obama in his first month in office.

Obama’s background, associates, and early presidential actions led many to the reasonable expectation that the newly elected chief executive would adopt a comprehensive national urban policy, moving the federal government back into an active role in American cities. As his newly appointed Housing and Urban Development secretary Shaun Donovan reported in 2009, the president “talked about community organizing, working in public housing where there were no jobs around. He talked about what he saw in Harlem when he was a student at Columbia University. It is a very personal issue for him that comes from his own experience” (Fletcher 2009, A08).

Yet President Obama seemed to abandon his affinity for community organizing and tackling poverty at the grassroots soon after he entered the White House. With two wars, the economic crisis, and health care reform to contend with, most other domestic policies disappeared from the front burner. Instead of a major federal initiative to help cities with large black populations, the White House continued the tradition of supporting private efforts. For example, Obama advocated for My Brother’s Keeper, a nonprofit program for mentorship, grants, and other services for black youth funded by African American celebrities, corporations, and foundations already active in urban social initiatives.

Indeed, trying to build consensus around the center, Obama rarely talked about poverty, race, or urban problems (Herbert 2012). He took pains to avoid singling out the “special” concerns of African Americans or targeting aid on cities per se. Rather, the administration adopted the Brookings Institution’s emphasis on large “metropolitan areas” encompassing some four-fifths of the American population rather than “cities.” Given that the Republicans gained control of Congress in 2010 and then refused to compromise with the president, Obama’s rhetoric aimed to unite, not divide Americans, to good electoral effect in 2012. When questioned about Obama’s avoidance of urban issues, Valerie Jarrett explained that he preferred to speak about “paths of opportunity for everyone. We try to talk about this in a way where everyone understands why it is in their self-interest.” The president would propose broad programs like the Affordable Care Act or Race to the Top that raised the standard of living of all Americans, an approach that Jarrett described as “inclusive” (Tough 2012; Dreier 2014). Thus, even the experts can be excused for missing the July 13, 2009, speech that Obama gave on urban affairs, since press coverage of it was minimal.9

After his reelection, there was a volte-face, and President Obama began hesitantly to speak about race. In early 2013, he talked passionately about opportunity and race with a group of teenage boys in Chicago, and a few months later, imagined that a killed black Florida teenager, Trayvon Martin, “could have been me 35 years ago.” After another meeting with young black youth, he reflected, “I grew up without a dad. I grew up lost sometimes and adrift, not having a sense of a clear path. The only difference between me and a lot of other young men in this neighborhood and all across the country is that I grew up in an environment that was a little more forgiving” (Baker 2015, A1). Yet the anger and rioting in cities after a series of racial incidents with police propelled Obama to speak out in 2015: “In addressing the issues in Baltimore or Ferguson or New York . . . if we’re just looking at policing, we’re looking at it too narrowly. If we ask the police to simply contain and control problems that we ourselves have been unwilling to invest and solve, that’s not fair to the communities, it’s not fair to the police” (A1). He added that, if society “writes off” some people, “that’s not the kind of country I want to live in; that’s not what America is about” (A1). Again, his language sought to unify and balance. Yet with rising racial violence and polls showing greater polarization around race, it may be that race relations is another urban-related area in which the high expectations for President Obama fell short.

After more than seven years in office, can one properly speak of an Obama administration national urban policy? I would contend that there is an Obama urban policy of sorts with three main prongs reminiscent of earlier administrations. First, like presidents in the consolidation era, Obama instituted some important governance reforms to break down agency silos, to leverage limited discretionary funds, and to address urban problems transversally. His urban policy was interdepartmental, multijurisdictional, comprehensive, inclusive, and evidence-based. The White House Office of Urban Affairs, the Domestic Policy Council generally, and the resurrected Interagency Council on Homelessness are cases in point. Second, the Great Recession was not only a constraint, but also an opportunity to help cities. As in the Great Depression, Obama restructured the U.S. housing finance architecture, rescuing homes from foreclosure, infusing the economy with new capital for mortgages, and passing new regulations for lenders and consumers. He also used stimulus funds in a manner that favored urban infrastructure, services, and municipal employees. Third, in the long line of his predecessors, Obama tweaked some existing place-based housing and urban programs into signature initiatives: Promise Zones, modeled on Empowerment Zones, and Choice Neighborhoods, a new-and-improved version of HOPE VI, a program established in 1993 under Clinton. However, for want of a dedicated funding stream, federal urban policy consisted of small-scale reformed versions of the few programs that had survived years of attrition.

 

Governance

Public administration practices have changed considerably in recent years, partly under fiscal pressures, partly reflecting a shift to evidence-based policy assessment. Trends in governing urban policy include program consolidation or silo busting; interagency coordination aimed at greater efficiency and resource sharing; rescaling or decentralizing to lower levels of government; and especially prominent in the neoliberal era, private sector involvement. Faced with congressional opposition to new spending programs, Obama’s urban policy came to employ new principles of governance. It is interagency, multijurisdictional, comprehensive, inclusive, and evidence-based.

From the start, interagency cooperation was central to Obama’s urban policy strategy. Like Nixon’s Council for Urban Affairs and Carter’s Urban and Regional Policy Group, the White House Office of Urban Affairs was created in 2009 to coordinate seventeen agencies and engage cities and metropolitan areas. Early on, the Office of Urban Affairs conducted a comprehensive review and evaluation of federal “place-based” programs, the first of its kind in thirty years. In an August 11, 2009, White House memo for the 2011 budget, the Office of Urban Affairs said it aimed to “increase the impact of government dollars by leveraging place-conscious planning and place-based programming” and called for modernizing and “investing in what works by evaluating existing place-based policies and identifying potential reforms and areas for interagency coordination.” The office articulated national goals for cities and metropolitan areas—competitiveness, sustainability, and inclusion—and then developed policies that advance those goals and measures progress.

silver 2In September 2010, the White House launched the Neighborhood Revitalization Initiative (NRI) whose July 2011 report called for integrating Promise Neighborhoods, Choice Neighborhoods, and other “centerpiece place-based programs in distressed neighborhoods” (Byrne Criminal Justice Innovation; Building Neighbor- hood Capacity Program; Health Center Program). The NRI’s approach to federal engagement was designed to be interdisciplinary, place-based, locally led, data- and results-driven, and flexible. Procedures were central to its work. The NRI called for resident engagement; strategic and accountable public–private partnerships; evidence of results and data to monitor progress; building organizational capacity; and aligning resources to a unified goal, including the “braiding” of federal funds into local resources. Resources were concentrated on a few areas, perhaps because “the interconnected challenges in high-poverty neighborhoods require inter- connected solutions.” As of 2012, only Baltimore, Boston, Camden, Newark, San Francisco, and Washington, D.C., had received both Promise Neighborhoods and Choice Neighborhoods funds.

Former Bronx Borough president Adolfo Carrión Jr. was the first director of the Office of Urban Affairs, but he left in 2010. Reflecting on the lack of accomplishments of the office, Carrión rationalized that “the focus at the time was to rescue the American economy from the precipice of a second Great Depression and health care” (Schlanger 2013). His successor, Racquel Russell, deputy assistant to the president for Urban Affairs and Economic Mobility, is similarly lackluster. The Office of Urban Affairs quietly merged with the economic mobility team under the Domes- tic Policy Council and reports to both Cecilia Muñoz and Valerie Jarrett. Today, the office has fallen into obscurity. Key urban leaders have had no contact with it. Richard Florida said it has “little to show for its efforts,” and Bruce Katz judges that “it failed miserably” (Holeywell 2013). “The Office of Urban Affairs,” said Patrick Sharkey, is an “example of a grand idea that was implemented in a half- hearted way, and then lost its momentum over time” (Schlanger 2013).

Much urban “place-based” policy was made in the Domestic Policy Council and the White House Office of Management and Budget (OMB). Like Moynihan’s Council for Urban Affairs, the Domestic Policy Council is comprised of numerous policy teams and offices that implement domestic policy priorities, including the “Urban Affairs and Economic Mobility” team that works for “Sparking Community Revitalization.” The four programs listed under this rubric are Promise Zones, Bringing Healthy Food to Communities, Creating Sustainable Communities, and Ending Homelessness. Creating Sustainable Communities, for example, is a partnership among the Department of Housing and Urban Development (HUD), the Environmental Protection Agency, and the Department of Transportation. The inclusive interagency collaboration of the White House Domestic Policy Council, White House Office of Urban Affairs, HUD, and the departments of Education, Justice, Health and Human Services, and Treasury was supposed to develop and execute the Obama administration’s place-based strategy “to transform neighbor- hoods of concentrated poverty into neighborhoods of opportunity.” In mid-2014, the president reshuffled his cabinet and moved Shaun Donovan, HUD secretary since the outset of the Obama administration, to head up the OMB. His replacement at HUD, Julián Castro, was a three-time mayor of San Antonio, as was Henry Cisneros, Clinton’s HUD secretary.

 

Restructuring Housing Finance

As in the Great Depression, the Great Recession forced leaders to restructure the institutions regulating private housing finance. The 2007 crisis led to 7 million fore- closures and rocked New Deal institutions as stable and successful as the FHA and some Federal Home Loan Banks. Like the 1930s’ establishment of the HOLC, the Bush administration aimed to help financial institutions lower monthly mortgage payments, keep people in their homes, and jumpstart the economy. However, the scale of the crisis dwarfed the sums allocated for these objectives.

Under George W. Bush, Congress passed the $700 billion Troubled Assets Relief Program (TARP) to rescue the nation’s largest financial institutions, and put Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) that dominate the secondary mortgage market, into federal conservatorship. Bush did little for “Main Street” until July 2008, when Congress passed the Housing and Economic Recovery Act (HERA). In addition to an ultimately unsuccessful FHA program to refinance subprime adjustable-rate mortgages into fixed-rate ones, Congress enacted the First Time Homebuyers Tax Credit to stimulate sagging house sales, a program Obama would extend in 2009.

HERA established the Neighborhood Stabilization Program (NSP). The NSP transferred a meager $4 billion to states and localities for the acquisition and disposition of foreclosed houses. There was fear that vacant homes would lead to squatting or crime and harm neighboring property values (Schwartz 2015, 2012; Immergluck 2011). In 2009 and 2010, President Obama allocated additional TARP funds to NSP2 and NSP3 that nonprofits and community-development corporations could also use to redevelop vacant homes. “There has rarely been a less loved or more necessary emergency program than TARP,” Obama (2009) said, but “as galling as the assistance to banks may have been, it indisputably helped prevent a collapse of the entire financial system.” In fact, after the Treasury Department released projections that taxpayers would get back most of the $700 billion budgeted for TARP, Obama (2009) said the resulting savings could lower the deficit and “shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street.”

Reforming housing finance, managing foreclosed properties, and stimulating the economy went hand in hand. In February 2009, weeks after assuming office, President Obama persuaded Congress to pass the American Recovery and Rein- vestment Act and to launch a foreclosure prevention program, Making Home Affordable (MHA). MHA was funded with $50 billion from TARP and had two parts: (1) the Home Affordable Modification Program (HAMP), lowering the high subprime debt-service costs of homeowners at risk of foreclosure, and (2) the Home Affordable Refinancing Program (HARP), helping eligible homeowners refinance their mortgages through Fannie Mae and Freddie Mac. According to the March 2013 Housing Scorecard released by HUD and the Treasury, over 1.5 million homeowners were assisted through Making Home Affordable, including 1.1 million permanent reductions in payments or principal through HAMP. Nearly 3 million mortgages were refinanced under HARP. And FHA offered more than 1.7 million loss-mitigation and early-delinquency interventions.

Nevertheless, the administration had expected to assist as many as 8 million homeowners. Many in arrears did not qualify for the program, and most loan modifications were only temporary, postponing default. The program was also voluntary. HAMP incentives to lenders to modify monthly payments of “under- water” borrowers—up to one-third of the 52 million households with mortgages, Moody’s reported, owing more than their house is worth—were insufficient com- pared to their fees on delinquencies or the value of foreclosure. As the recession wore on, the causes of foreclosures shifted from high-cost loans to the terms of adjustable rate mortgages, both prime and subprime, and toward defaults due to unemployment. The Obama administration repeatedly reformed the foreclosure prevention programs to overcome weaknesses and expand eligibility for assistance (Immergluck 2013). HERA also created the Federal Housing Finance Agency that, in 2009, placed Fannie Mae and Freddie Mac into conservatorships. After wading into high-risk Alt-A mortgage-backed securities, Fannie Mae (reconstituted as a private corporation in 1968) and Freddie Mac (founded as a private corporation in 1970), came close to collapse. Because private lending had dried up, the federal government provided these institutions with $187 billion in public capital to acquire mortgages under strict regulations. By 2015, the GSEs and FHA were financing virtually the entire mortgage market (Schwartz 2015).

Since 2011, the Obama administration has called for winding down the GSEs and limiting the government role in the secondary mortgage market to regulating and insuring these securities. Republicans favor recapitalizing and privatizing Fannie. While politicians argue, Fannie Mae and Freddie Mac have remained wards of the state. Since they began earning profits in 2012, the GSEs have returned to the Treasury more than $50 billion over the amount they drew down in the bailout, prompting some shareholders to sue (Morgenson 2016). At the end of 2014, the Mortgage Finance Reform Working Group of the bipartisan Housing Commission were discussing how to reduce Fannie and Freddie’s share of the mortgage market and to prevent public assumption of private sector risk. As of mid-2016, no one had decided what to do with the housing finance system.

In the Housing and Economic Recovery Act of 2008, Congress established the National Housing Trust Fund to be funded by a percentage of the profits from Fannie Mae and Freddie Mac. HERA had provided for the GSEs to set aside funds for this purpose, but FHFA temporarily suspended the rule until after the recovery. The Obama administration tried to allocate $1 billion to the National Housing Trust Fund, but after the nationalization of the GSEs, Congress refused to provide any new source of funding. Instead of waiting for Congress, the Obama administration tried to increase funds for affordable rental housing from other governmental sources for loans already guaranteed through FHA’s risk-sharing program. By 2012, the GSEs were in the black, profits driven largely by one-time, tax-related adjustments and legal settlements and shrinking loan portfolios. They paid taxpayers back more in dividends than they were loaned, monies now available for the National Housing Trust Fund. At the very end of 2014, the FHFA directed Fannie Mae and Freddie Mac to allocate between $250 million and $350 million to the National Housing Trust Fund for distribution to the states to house very low-income renters. The disbursements would be the first new money in decades to produce low-income rental housing in the United States. The National Alliance to End Homelessness reports that the National Housing Trust Fund will receive $136 million in 2017, or $46 million less than the $182 million the administration predicts will be avail- able to allocate to states for the first time in summer 2016.

Recognizing that the foreclosure crisis was precipitated by inadequate federal oversight of subprime loans, President Obama proposed in June 2009 a new agency to protect consumers from unfair, deceptive, and abusive financial practices. In July 2010, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The act created the Consumer Financial Protection Bureau (CFPB), which consolidated most federal consumer financial protection authority in one place. Housed within the Federal Reserve System, CFPB supervises banks, credit unions, payday lenders, and other financial companies, and enforces federal consumer financial laws. Lenders must now ensure that borrowers can repay their loans and must retain a stake in the mortgages they sell to the secondary market to discourage passing the risk of default to investors. Built mainly on bills Congress drafted before the crisis, Dodd-Frank was actually a modest set of regulatory reforms compared to calls for breaking up and limiting the size of American banks so they would never again be “too big to fail.”

Nevertheless, Republicans opposed the law and, since gaining control of Congress in the fall 2010 elections, tried to repeal arcane measures, worked to loosen regulations, pushed for delays, threatened legal challenges, and filed lawsuits. As soon as the Republicans took control of both houses of Congress in January 2015, they set about dismantling Dodd-Frank one provision at a time. Democrats in Congress fought back, but “systematically important” banks continue to chafe under the regulations, transparency requirements, and federal powers to take control of them in a future crisis (Krugman 2015).

 

The Stealth in the Stimulus

During the Great Depression, it will be recalled, FDR reformed the mortgage market before increasing public expenditures and launching the public works projects of the New Deal. Similarly, building on Bush II measures, President Obama first worked on stabilizing the financial system that brought about the crisis and, in 2009, succeeded in getting the stimulus bill through Congress. A copious definition of national urban policy encompasses expansionary spending programs like those of the Keynesian era. Just as President Roosevelt “primed the pump” in the 1930s, President Obama’s expansionary fiscal response to the Great Recession preserved urban jobs, and invested in the built environment to sustain urban growth over the long term. Since most government spending in the United States takes place through states and localities, direct investments in place-based assets that drive economic prosperity disproportionately benefit cities (B. Katz 2010). Thus, implicit in Obama’s budget priorities, including for programs with goals that are not explicitly oriented to places per se, was a “stealth urban policy.”

Immediately upon assuming office, President Obama persuaded Congress to pass an economic stimulus bill offering $788 billion in new spending and tax breaks, including $13 billion for housing-related purposes. Many of the largest and most important investments of the stimulus went to institutions and organizations that were essential to cities. The American Recovery and Reinvestment Act of February 2009 provided funds to states and localities for construction and investments in education, Medicaid, and transportation projects. ARRA included the issuing of Build America Bonds, generally high-quality infrastructure bonds with above- average yields. Traditional tax-exempt bonds indirectly provide for lower borrowing costs for state and local governments through a federal tax exemption to investors for the interest income received on the bonds. In contrast, Build America Bonds are taxable bonds issued by state and local governments for which the federal government makes direct payments to state and local governmental issuers (called “refundable tax credits”) to subsidize a portion of their borrowing costs in an amount equal to 35 percent of the coupon interest on the bonds. It is difficult to estimate ARRA’s net impact because no one knows what the economy would have done in the absence of the law. Most of the stimulus impact on output and employment was felt in 2010, but even in 2013, ARRA was still officially funding about 76,000 jobs. While the stimulus somewhat helped improve U.S. infrastructure, the president himself conceded that he lacked the political capital to increase the magnitude of the stimulus. Despite the need for greater pump-priming, congressional Republicans insisted on layoffs. “This is the first recovery where you actually saw the government work force decline, and that created this massive fiscal drag throughout the recovery,” the president argued. “Progressives don’t fully appreciate the degree to which the 2011 budget deal not only averted a potential default but actually limited the potential damage of a newly emboldened Congress in imposing austerity on a still-fragile recovery,” Obama said (Sorkin 2016).

Some administration policies worked at cross-purposes to the stimulus. Dodd- Frank and Federal Reserve banking regulations may have made capital scarcer and more expensive. Even the president’s signature bill, the Affordable Care Act, may have dampened economic growth, since it slowed the rise of medical costs in a sec- tor that comprises almost one-fifth of the American economy. The administration gave Obamacare priority in Congress at the expense of more stimulative infrastructure programs.

silver 3There has not been a new issue of Build America Bonds since the securities’ federal subsidy expired in 2010. Although it was once a bipartisan issue, the president subsequently had difficulty finding resources for infrastructure. Obama’s 2011 and 2013 proposals for an infrastructure bank to leverage private investment with public money went nowhere with congressional Republicans who labeled the president “Santa Claus.” Republicans and Democrats could not agree on the Highway Trust Fund, gas tax, and other capital spending. Indeed, net federal nondefense investment had been falling from its peak in the late 1960s (at $45 billion in today’s dollars). The 2009 stimulus brought it back up to $28 billion in 2010, but since then it plummeted further to $10.3 billion in 2013, the lowest level since 1958. In contrast, net nondefense investment by states and cities soared since the mid-1980s until 2010, after the housing boom collapsed (Wessel 2015). In 2013, Obama again picked up the theme of infrastructure in his State of the Union address. To rebuild the nation’s “raggedy” roads, bridges, schools, and other infrastructure, he proposed more stimulus grants, tax breaks, and loans to attract private investment, both American and foreign. He also suggested new “America Fast Forward Bonds” to enable state and local governments to borrow money for construction projects, to no avail (Baker and Schwartz 2013). In hindsight, the president mused, “our failure in 2012, 2013, and 2014 to initiate a massive infrastructure project—it was the perfect time to do it; low interest rates, construction industry is still on its heels, massive need—the fact that we failed to do that, for example, cost us time. It meant that there were folks who we could have helped and put back to work and entire communities that could have prospered that ended up taking a lot longer to recovery” (Sorkin 2016).

Of course, cities also benefited indirectly from social programs and income transfers. People-based policies also help places, although the poor do not only live in cities nowadays. A central tenet of Keynesian stimulus spending is that in an economic crisis, you try to get as much money as quickly as possible into the hands of people who will spend it right away, and the less money people have, the more likely they are to spend every dollar they receive from the government. Thus, ARRA supported Americans in need through extended Unemployment Insurance, SNAP, and tax relief such as the new Making Work Pay tax credit. The total amount in the stimulus package targeted specifically at low-income Americans in 2009 topped $80 billion. The multiplier effects were huge, but their role in helping cities went largely unperceived as such. Thus, it may be that “urban revitalization is a happy accident of federal legislation with other goals” (M. Katz 2009, 19). However, that happy accident was soured by the 2013 sequester, automatic budget cuts that removed billions of dollars of stimulus from the economy and slashed programs for the poor.

Although ARRA funds soon ran out, the president’s economic record seems remarkable when one considers what could have happened without a stimulus. Since Obama took office, the deficit declined by $1 trillion or roughly three-quarters, all the bank bailout funds were recouped, GM and AIG are still operating, 14.4 million new jobs were added, unemployment—which peaked at 10 percent the year Obama took office—fell to 5 percent, the stock market rose from the 6,000s to the 16,000s, and economic growth exceeded that of other advanced countries (Sorkin 2016).

 

Obama’s Urban Programs

While federal housing programs saw a significant budgetary increase in the first year of the Obama administration, due mostly to the stimulus bill, federal spending for most affordable housing categories has been flat or reduced in the years since. Transportation expenditures rose from $70 billion to nearly $100 billion after Obama took office, but HUD’s outlays fell overall from $60 billion to barely $36 billion in 2015, or 1.7 percent to 0.9 percent of total outlays (OMB 2016, 85). Funds earmarked specifically for HUD were internally transferred across programs, phasing out HOPE VI, for example, for Choice Neighborhoods (see Table 4.1). As the National Low Income Housing Coalition reported, one of the only areas not to be cut was the budget for homeless assistance grants. Judged in historical perspective, therefore, Obama’s explicitly urban programs were modest and reached only a small number of the cities and neighborhoods in need.

Private involvement in public housing can be traced back to the 1960s’ leased housing and Sections 235 and 236, accelerated in the 1980s, and culminated under Obama in the Rental Assistance Demonstration (RAD). Given the many years of underfunded capital budgets, even the best managed public housing is in need of physical repairs (Finkel et al. 2010). Table 1.1 shows authorizations fell from $2,500 million in 2010 to $1,970 million in 2016. Since large infusions of capital funds were not forthcoming from Washington, local housing authorities have considered raising funds by selling some of their land to private developers or by selling the buildings themselves and giving the residents housing voucher subsidies instead. RAD allows public housing authorities to convert their current assistance to long- term Section 8 contracts or “project-based vouchers.” These contracts leverage additional debt that can be used to address critical capital needs. As of 2014, sixty-eight public housing authorities received an initial RAD commitment from HUD.

Table 1.1 BUDGET AUTHORIZATIONS FOR SELECTED HUD PROGRAMS UNDER OBAMA (IN $ MILLIONS)

table-1

As late as 2010, it looked as though President Obama had launched an innovative national urban policy (Peirce 2010). The budget called for additional housing vouchers, full funding of public housing, as well as the Housing Trust Fund, new rounds of the Neighborhood Stabilization Program, and Build America infra- structure bonds. Early in his administration, the president also proposed several signature programs for neighborhoods, each based in a particular department but, as mentioned, cooperating transversally with other ones. For example, Sustain- able Communities, an interagency partnership of HUD, DOT, and EPA, provides grants as incentives for interjurisdictional cooperation on metropolitan transportation, housing, and land use projects like transit-oriented development, light rail, and smart growth initiatives. Obama’s proposed Promise Neighborhoods go beyond the schools, offering early-childhood, afterschool, and parental education in distressed neighborhoods. Other cooperative ventures among federal agencies included the Healthy Food Initiative, Promise Zones, and most notably, the Choice Neighborhoods Initiative.

 

Choice Neighborhoods

A centerpiece of Obama’s housing policy is the Choice Neighborhoods Initiative (CNI). It addresses three dimensions at once: housing, people, and neighborhood. Choice Neighborhoods is a central part of the White House Neighborhood Revitalization Initiative, an interagency partnership between HUD and the departments of Education, Health and Human Services, Justice, and Treasury, dedicated to locally driven transformations of distressed neighborhoods. As part of the White House’s recognition that “interconnected challenges in high-poverty neighborhoods require interconnected  solutions” (https://www.whitehouse.gov/administration/eop/oua/initiatives/neighborhood-revitalization), CNI offers “a comprehensive approach to community development centered on housing transformation” whose goal is “to transform neighborhoods of poverty into viable mixed-income neighbor- hoods with access to economic opportunities” (Urban Institute 2013, 1–5). The intention is to use the revitalization of severely distressed public and assisted housing to leverage comprehensive neighborhood investments ranging from early childhood education to employment, safety, and public transportation.

In many respects, CNI is a rebranded, new and improved version of its predecessor, the Clinton-era HOPE VI program. HOPE VI grew out of the National Com- mission on Severely Distressed Public Housing, created by Congress in 1989. It was established in 1992 for the rehabilitation and replacement of about 86,000 severely distressed public housing units by 2000. By 2007, it had demolished more than 78,000 distressed public housing units, with another 10,000 units readied for redevelopment. Grantees could also spend up to 15 percent of HOPE VI funding for community and supportive services. In place of public housing, HOPE VI constructed hundreds of mixed-income housing projects in the attempt to deconcentrate neighborhood poverty. In fact, HOPE VI demolished more low-income units than the total number of mixed-income units built.

Both HOPE VI and CNI share the goal of deconcentrating poverty, but CNI made some changes in response to recent critical evaluations of the earlier pol- icy. Unfortunately, in the earlier mobility program, most relocated public housing tenants ended up living in very poor, sometimes high-crime neighborhoods (Buron, Hayes, and Hailey 2013), and not all those who wished to return to their old neighborhoods qualified for the new mixed-income housing. When Obama spoke about creating “neighborhoods of choice,” he meant that after revitalization, non- poor households would voluntarily choose to live in previously poor neighbor- hoods. Less attention was devoted to the choices of relocated residents. They are supposed to receive case management and wraparound services to help them move to better housing in substantially safer neighborhoods.

CNI differs from HOPE VI in several ways. First, the revitalization may extend beyond the perimeter of public housing developments to encompass their surrounding neighborhood, to improve all residents’ health, safety, employment, and education. It extends residents’ access to services, effective schools and educational programs, public assets, public transportation, and jobs. Second, it sup- ports the replacement or rehabilitation of both distressed public housing and other types of HUD-subsidized rental housing with energy-efficient, mixed-income housing that would remain physically and financially viable and affordable for at least twenty years. “Mixed-income” means a combination of extremely low-income, low-income, and, as appropriate, moderate-income housing. To entice private capital investment, mixed financing techniques may also yield housing with various income limits, including no income restrictions. Third, unlike HOPE VI or much earlier urban renewal programs, CNI requires one-to-one replacement of demolished subsidized units, although it permits replacing up to half the units with vouchers in metropolitan areas with soft rental housing markets. Fourth, public housing authorities need no longer be the lead agencies for neighborhood transformation.

Congress has never legally authorized Choice Neighborhoods, which exists as a HUD demonstration project by virtue of annual appropriations since FY 2010. Each year notices of funds availability are issued and applications evaluated. As in Model Cities and EZs, more cities—forty-seven between 2010 and 2012—received small planning grants, while nine were awarded more lucrative implementation grants (twelve as of 2016). HUD maintains that the $200 million in grants are leveraging over $1 billion in local and regional dollars.

An Urban Institute/MDRC (2015) interim report on five initial recipients of these grants found much unevenness in outcomes. For example, while all the sites rely on federal low-income housing tax credits (LIHTCs), the Boston project has no unrestricted housing units, while the others are mixed-income. Similarly, the lead agencies in Boston and Chicago are not public housing authorities so they can- not issue vouchers and have no experience with services for people. None of the projects devote attention to improving the lives of those who move away permanently. Citizen engagement in planning varies across the sites. As for neighbor- hood improvements, Choice Neighborhoods will have a modest impact, only complementing or filling gaps in larger recent, committed, and expected public and private investments. The first CNI awards went to places where significant efforts already were under way (Urban Institute 2013). This may accelerate apparent gains, but the sequester budget cuts meant that implementation grants for other cities were delayed. After increasing from $80 million in FY 2015 to $125 million in FY 2016, Obama has requested a considerable expansion of the pro- gram to $200 million in FY 2017.

A review of the 176 applications for planning grants under Choice Neighbor- hoods in the first three rounds also found that the targeted neighborhoods with concentrated poverty were also racially and ethnically segregated and suffered from other difficulties like low education, low labor force participation, and high unemployment (Gebhardt 2014). Thus, like HOPE VI, CNI is likely to have racially differential impacts and may lead to gentrification. However, enforcement of “affirmatively furthering” fair housing may allow existing minority residents to choose to stay, not only to move on as their neighborhoods become “choice” for higher-income whites.

 

Promise Communities

In a 2007 speech, Senator Obama painted urban poverty as “a disease that infects an entire community….We can’t just treat those symptoms in isolation. We have to heal that entire community” (Obama 2007). Like William Julius Wilson (Wilson 2010), he was much taken by the apparent success of Geoffrey Canada’s Harlem Children’s Zone to overcome the effects of spatially concentrated poverty. In a ninety- seven-block area, HCZ combines some two dozen structural and cultural programs and innovative charter schools. Assessments using random assignment techniques provided convincing evidence that intensive schooling—long school years and school days, after-school and weekend tutoring—can radically improve English and math test scores, helping inner-city students of color surpass their peers in other public schools and close the gap with whites. In a 2008 campaign speech, candidate Obama promised to replicate the Harlem Children’s Zone in twenty cities. The Department of Education took the lead on Promise Communities, and accepted over three hundred applications in the summer of 2010. Promise Com- munities takes aim at concentrated poverty with holistic urban policies addressing two fronts, structural and cultural. It involves multiple agencies providing a full network of services to an entire low-income neighborhood “from birth to college.” Yet some argue that Promise Communities does not actually replicate the Harlem Children’s Zone, and so, equal success should therefore not be expected. Not only did HCZ have an annual $80 million budget, compared to just over $200 million for twenty Promise Neighborhoods, but much of its budget came from private sources. The federal government provides half of the funding for Promise Communities, with the rest coming from philanthropy and businesses at a cost of a few billion per year.

 

PROMISE ZONES

Turning to local economic development in his 2013 State of the Union Address, President Obama announced the Promise Zones Initiative as part of his plan to help the American middle class. It creates partnerships between local communities, faith-based and nonprofit organizations, and businesses to create jobs, increase economic security, expand educational opportunities, open up access to quality, afford- able housing, and improve public safety. Again, it calls for the pursuit of multiple goals. In August 2014, the president named the first five Promise Zones of the twenty planned over the following three years. They will have zone designations for ten years.

Like Obama’s other signature programs, the Promise Zones Initiative builds on earlier programs, continuing the neoliberal approach. The administration admits that Promise Zones are modeled on Clinton-era Empowerment Zones, offering tax credits to promote job creation, with interagency coordinated efforts addressing social problems, such as high crime and poor education in the designated neighborhoods. Perhaps realistically, Obama did not propose any new direct spending on Promise Zones, whereas Empowerment Zones provided up to $100 million per EZ as well as smaller grants to the many Enterprise Communities. While Republicans have favored enterprise zones in the past, Congress has not yet approved the tax incentives.

 

Ending Homelessness

Homelessness became an issue in the United States just as national urban policy went into eclipse. In 1981, President Ronald Reagan cut domestic spending, which instigated a recession and raised unemployment. Veterans returning from Vietnam, many with substance abuse problems, received little assistance upon reentry. Soon, people living on the streets became visible. In the nation’s capital, activist Mitch Snyder set up a “Reaganville” or tent city deliberately echoing the Hoovervilles of the Great Depression and shamed the president into a federal commitment to the city’s shelter. Snyder and other activists drew public attention to the growing problem of homelessness, resulting in the 1987 McKinney Act, the first federal homeless assistance.

Although the George W. Bush administration set a goal in 2002 to end chronic homelessness in ten years, the Obama administration shepherded that objective into law. The Homeless Emergency Assistance and Rapid Transition to Housing Act of 2009 was a clear turning point, reauthorizing and amending the McKinney- Vento Act and creating a federal-level program with measurable, time-delimited goals. The HEARTH Act aims to ensure that no family is homeless for more than thirty days, and to prevent those at imminent risk of homelessness from losing shelter. HEARTH broadened the definition of homelessness to include those at risk of homelessness (e.g., doubled up) and consolidated into one Continuum of Care pro- gram the Supportive Housing Program, rental subsidies for permanent supportive housing, and Moderate Rehabilitation/SRO long-term rental subsidies. In addition, the 2009 Helping Families Save Their Homes Act contained preventative provisions to protect renters who face eviction when their landlords go into foreclosure. After 2012, the budget for homelessness, three-fourths of which is urban, also increased (Table 1.1). Under President Obama, Homeless Assistance Grants through HUD rose from $1,865 million to $2,250 million, with even more requested for FY 2017.

In keeping with his transversal, evidence-based governance approach, Obama resurrected the Interagency Council on Homelessness. Initially established in 1987, the Interagency Council fell dormant in 1996 until it was revitalized in 2002 in commemoration of the fifteenth anniversary of the signing of the McKinney-Vento Homeless Assistance Act. The council coordinates and combines services of nine- teen federal agencies and monitors the results of federal funding to local service providers. Local “Continuums of Care” (CoCs) distribute Homeless Assistance Grants to fund transitional and permanent housing as well as services for home- less individuals. They also collect information on clients. Local Homeless Management Information Systems, established by Congress in 2001, collect data for HUD, which compiles it into the Annual Homeless Assessment Report (AHAR) to Congress, the first of which was issued in 2005. The AHAR estimates the number of individuals who are homeless within a given year. Local CoCs also conduct point- in-time counts of homeless individuals on one day in January at least every two years. Today, the vast majority of CoCs participate in the Homeless Management Information System. The administration charged the Interagency Council on Homelessness with executing Opening Doors, the first national strategic plan to end homelessness. Opening Doors called for ending chronic and veteran homelessness by 2015, mainly with supportive housing, and homelessness among families, youth, and children by 2020. It signaled the federal government’s commitment to make homelessness a priority for all federal agencies and to partner with states, localities, private organizations, and other stakeholders to use strategies proven to be effective. For example, HUD partnered with the Department of Veterans Affairs (VA) to establish joint goals and monitor progress in the fight to end veterans’ homelessness, notably by combining housing and supportive services. In FY 2015, HUD received $75 million for approximately 10,000 new joint HUD-VA supportive housing (HUD-VASH) vouchers targeted toward chronically homeless veterans. Since 2010, veterans’ homelessness has declined 36 percent, although family homelessness has remained high, given the high cost of housing. According to the AHAR, approximately 1.42 million people used a shelter during the course of the 2013 year, which is a 10.5 percent decline from 2007. However, the average length of stay in a shelter program increased slightly. From 2009 to 2015, overall homelessness in the U.S. decreased from 630,227 to 564,708 at one point in time, for a decline of 10 percent (National Alliance to End Homelessness 2016). At this rate of change, the administration is actually moving closer to its goals. Indeed, the nonprofit Common Ground asserts that eight cities are already on a path to essentially ending homelessness in their metropolises in the not too distant future. Although veterans’ homelessness has declined, the ambitious 2015 goals were not met, and target dates were pushed back to 2020.

Obama also changed the approach to ending homelessness. Before 2000, most experts thought that people experiencing chronic homelessness had to go through a linear process or continuum of care, addressing personal and health problems while living in transitional housing before they were “ready” for a permanent home. The Clinton administration’s HUD secretary Andrew Cuomo launched the “continuum of care” to institutionalize these pathways through shelter plus care. Yet evidence from controlled experiments in New York and Philadelphia found instead that chronically homeless individuals do better coping with substance abuse or health issues if they were provided with “housing first.” Hundreds of cities have now adopted the Housing First approach, persuaded by research that it in fact saves taxpayer dollars that would otherwise go to hospitals, prisons, and other costs. They have also developed local plans to end homelessness within the parameters of Opening Doors. Key to Housing First is the provision of more rent subsidies for those at risk of homelessness. The National Housing Trust Fund allocations may help sup- ply these rental subsidies. The Obama administration continues to propose increases in expenditures to end homelessness and implement the HEARTH Act. The president’s FY 2017 budget proposed $2.664 billion for HUD’s McKinney-Vento Home- less Assistance Grants, a $414 million or 18 percent increase. Although it slightly reduced capital funds for public housing and community development funds, the administration advocated for a ten-year $11 billion program of housing vouchers ($8.8 billion) and short-term rapid re-housing assistance ($2.2 billion) to enable 550,000 families to escape homelessness. In addition, Obama proposed discretionary spending, which requires congressional appropriations, for 10,000 new housing vouchers for homeless families with children and increases permanent supportive housing for the chronically homeless by 25,500 units (Stewart 2016). In total, the HUD budget for existing programs would increase by $1.8 billion over FY 2016 (National Alliance to End Homelessness 2016). Since sequestration has ended, these proposed priorities have a better chance of being funded than they had earlier in Obama’s second term.

 

Late Developments

Frustrated by Republican recalcitrance in both houses of Congress, President Obama focused on policies and regulations he could order with executive powers instead of requiring legislation. Fair housing is an example. John Trasviña, a civil rights lawyer and head of the Mexican American Legal Defense Fund, whom Secretary Donovan had appointed to lead HUD’s fair housing office, began rewriting federal rules to enforce racial desegregation. It took close to six years, but in 2015, the Obama administration released the new rules. Pointing to academic evidence on neighborhood effects on opportunities, HUD Secretary Julián Castro remarked that, “a ZIP code should never prevent any person from reaching their aspirations” (Davis and Appelbaum 2015, A1).

The moment was right. The president was under pressure to act after serious racial clashes over police mistreatment of African Americans in Ferguson, New York, and Baltimore. He was buoyed by the stunning Supreme Court decision in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project. Whereas earlier interpretations of the Fair Housing Act forbade housing discrimination, they did not mandate proactive steps to promote integration. The court expanded the interpretation of the 1968 Fair Housing Act to include the mandate to “affirmatively further” racial integration and provided new legal means to enforce the act with penalties. HUD was now justified in requiring localities to report how they used federal housing funds to reduce racial disparities. While localities can refuse federal funding to avoid these requirements, most cannot afford to do so and thus are expected to comply. This change may have a long-term impact on segregation in the United States, but any credit must be shared with the Supreme Court.

 

Conclusion

President Obama came to office amid high hopes that American cities and urban minorities would once again receive the attention they enjoyed from the 1950s to 1970s. Despite some repurposed programs and administrative innovations, most observers have been disappointed. Stymied by fiscal constraints due to the economic downturn and Republican intransigence, the administration had few resources with which to help the cities. Nevertheless, it made do with less, issuing executive orders and finding efficiencies through interagency collaboration. The president can point to three areas of accomplishment in national urban policy.

First are the administration’s reforms of urban governance. Like the Nixon and Carter consolidation approach to national urban policy, the Obama White House began with an interagency review of programs that work. Then, the Domestic Policy Council of the White House set about coordinating efforts transversally, breaking down the “silos” of federal departments and agencies and ostensibly leveraging resources and economizing. Evidence of program performance was required in return for federal funds. Governance innovations broadened the scope of what now passes in Washington as “urban” policy, encompassing environmental, transportation, education, justice, and other fragmented program jurisdictions under the broader rubric of aid to cities and metropolitan areas. The administration also devised new ways to engage the private sector in urban policy.

Second, much as FDR responded to the Great Depression, Obama used housing finance reform and the Recovery Act to help cities. There was urban stealth in the federal stimulus. Just because spending is not earmarked as urban does not preclude it having a disproportionate impact on cities or metropolitan areas. ARRA funds, extended unemployment benefits, and intergovernmental transfers were of particular benefit to economically hard-hit cities, many with a backlog of infrastructural repairs ready for implementation. Federal interventions in the financial sec- tor also helped cities reeling under the weight of foreclosures and lost property tax revenues. Obama programs to assist underwater homeowners simultaneously helped municipalities, keeping potentially foreclosed houses on the property tax rolls. Similarly, the federal takeover and recovery of the GSEs capitalized the National Housing Trust Fund for the first time. However, Obama’s programs for neighborhood revitalization through the Choice Neighborhoods Initiative and other efforts at community development were modest at best.

Finally, despite the hardships imposed by the Great Recession, the Obama administration made some serious progress in reducing homelessness. Funding for housing special populations increased, and the president also tried to multiply the available low-income housing vouchers. In 2014 and 2015, as economic growth and job creation picked up, the president finally engaged with the urban issues of race, policing, and segregation. There is some reason to hope that Obama’s last year in office will fulfill his original promise.

 

Hilary Silver is Professor Emerita of Sociology and Urban Studies at Brown University, and Chair of the Department of Sociology; Professor of Sociology and Public Policy, George Washington University. She is also a Commissioner of the Providence Housing Authority, a consultant for the World Bank, and a longstanding affiliate of Harvard’s Center for European Studies. She is a Senior Visiting Fellow at the Ash Center for Democratic Governance and Innovation.

“National Urban Policy in the Age of Obama” by Hilary Silver appears here by permission of the University of Minnesota Press from Urban Policy in the Time of Obama edited by James DeFilippis, copyright 2016 by the Regents of the University of Minnesota. All rights reserved. Readers can purchase the book here.

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